Graw, Stephen (2013) Recent developments in the law of contract. In: Thomson Reuters ALB Masterclass Series. From: Thomson Reuters ALB Masterclass Series, 18 June 2013, Brisbane, QLD, Australia. (Unpublished)

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Abstract

[Extract] It has long been accepted that the parties are free, at the time they contract, to agree on the damages that will be payable in the event that one or other of the parties fail to perform their obligations under the contract. Such liquidated damages clauses are enforceable and, if there is a failure to comply with a nominated performance obligation, the sum specified is recoverable by the other party as a debt rather than as damages, thereby rendering the normal compensation principle as well as the normal requirement to prove causation, remoteness, quantification and mitigation redundant.

The one requirement for validity of a liquidated damages clause is that the sum specified must be a genuine pre-estimate of likely loss. If the sum specified bears no real relationship to the loss likely to be incurred as a result of the non-performance, the stipulation is not a liquidated damages clause but a penalty and penalties will not be enforced. Instead, the courts disregard the clause and substitute their own determination of what damages are properly payable.

Until recently, the accepted view was that for a clause to be a penalty, and therefore unenforceable, it had to have, as the trigger for its operation, a breach of contract by the party against whom is was sought to be enforced. That view was challenged and dismissed by the High Court in:

Andrews v ANZ Banking Group Limited (2012) 290 ALR 591; 86 ALJR 1002; [2012] HCA 30

Item ID:	32052
Item Type:	Conference Item (Presentation)
Keywords:	contract law
Date Deposited:	16 Apr 2014 05:37
FoR Codes:	18 LAW AND LEGAL STUDIES > 1801 Law > 180105 Commercial and Contract Law @ 100%
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